Assessing Your School’s Back-Office Support Needs

By Adam Miller, SVP, EdTec Inc. and Peter Laub, EVP, EdTec

Originally published May 2012

Charter school leaders face two difficult challenges: managing a non-profit business and navigating the maze-like world of public education bureaucracy.  This one-two punch has left many charter school leaders and board members dazed and confused.  Help is not always easy to find, as specialized knowledge of school operations and finance, as well as non-profit corporate regulations, rarely reside in a single individual.  Even if relief is found, it is a continuing struggle to stay on top of changing funding schedules, amended reporting requirements, and moving grant deadlines.  Not to mention, of course, that all of this needs to be done while maintaining focus on the school’s mission to provide an outstanding education.

The complexity of charter school finance, the lack of experienced finance staff, and the desire to concentrate on the school’s educational mission has led hundreds of charters to conclude that a high quality business services provider can be an invaluable asset.  However, the decision as to whether to outsource services and to which provider depends on the unique needs and desires of each charter school.  If there is one thing those of us in the charter school world all know, one model does not fit all.

Bringing You Scale, Allowing You Focus

Being independent allows a charter school the autonomy to be nimble and to focus on the needs of its unique students and community.  Unfortunately, this wonderful flexibility comes with a price:  lack of scale.  The benefits of scale allow a Safeway supermarket to charge less than the corner store and Ikea to bring you a dresser for $50.  It should theoretically allow your school district to operate less expensively than your charter school, but alas that must be the exception that proves the rule.  a business services provider brings the benefits of scale to a charter school.  Scale allows business services providers to hire and train specialized staff that many charter schools could not afford on their own.  Further, scale allows providers to build redundancy within functional areas.  If a staff member at the business services provider who lives and breathes the ConApp leaves, there is another person there with similar skills and knowledge who can step in.  If this happens at the school level, it can be a different story.  The school’s intellectual capital related to business operations walks out the door with the staffer, and the school struggles to fill the void.

Scale also allows the rapid development and implementation of best practices.  Each year, the business services provider learns from the challenges and successes of dozens of schools.  Scale then allows some providers to invest in an internal knowledge base as well as efficient tools and systems to disseminate its knowledge to every client.  A business services provider can move a school quickly up the learning curve and help it avoid obstacles that tripped up other charters in the past.

Besides providing the latest information and a consistent resource, outsourcing to a high quality business services provider can have a positive effect on the bottom line.  Small and medium sized schools will almost always realize cost savings by outsourcing business services, compared to hiring internal staff with similar levels of expertise, especially when the true costs of hiring, training, managing, and retaining or replacing staff are factored into the equation.  It is cost prohibitive to hire experts across a range of business functions.  Even for larger schools, outsourcing can be a cost savings because a high quality back-office services firm’s business operations emphasis creates efficient internal systems resulting in time and cost savings.

Lastly, business services providers can bring focus to the financial operations of a school.  The key purpose of a charter school is to increase student achievement.  Rare is the charter school founder who wrote a petition because he or she was passionate about STRS reporting, cash flow management, or audit filings.  The focus of the school leadership should be on instructional issues, and fulfilling the promise of its charter.  However, the business and financial operations are necessary prerequisites to a successful academic program.  The best academic model can be torpedoed by poor financial oversight.    An outsourced business services provider can often bring the necessary level of focus and experience to the business and financial operations, freeing the school staff to focus on improving the education of their students.

If the pain points sound familiar and the benefits attractive, it is worth exploring with your school leadership if a business services provider is a smart investment that will help further your mission.

Choosing a Partner

Once you’ve decided you’d like to work with a business services provider, you need to determine which one will work best for your school.  A business services provider should be more than simply a vendor to the school.  It should be a strategic partner that has as much invested in the success of the school as the board and staff do.  To be a partner, the business services provider needs to do more than process financial transactions and provide historical financials.  While a provider’s handling of transactions and financials may still free you up to focus on the school’s academic program, a true partner is one that helps you align your budget and operations in support of that academic program.  The provider should view itself (and more importantly, you should view the provider) as an outsourced CFO who monitors historical financials, creates accurate, forward-looking budget forecasts, closely watches cash flow, and offers strategic advice tailored to your school’s financial and business operations.

There are meaningful and important differences in service delivery among the established back-office providers in California.  It is critical that the school staff and board evaluate their own needs and then carefully choose the appropriate provider that matches those needs.  The foundation for any successful relationship is knowing what you bring to the partnership and what you need from your partner.  Too often there is a mismatch between the needs and expectations of the school and the provider.

When expectations are not aligned, incorrect assumptions can be made about who is doing what, which can lead
to costly and even disastrous outcomes.  This mismatch can range from who is completing and filing which reports to who is responsible for keeping track of the budget forecast.  A missed report or an inaccurate forecast can result in losses in the tens of thousands.  To put it more plainly, it can result in the loss of a budget for an instructional aide, a set of musical instruments, or a series of field trips.

Critical Questions to Ask When Choosing a Back-Office Partner:

• Where do we need help? Identify the gaps in skills and knowledge of your staff and board.  Do you have a charter finance expert on your team and therefore, are simply looking for an outsourced bookkeeper or transaction specialist (accounting, payroll, etc.), or are you looking for CFO level guidance about your financials and financial plan?  Do you need support finding and financing a facility?  Are there back-office operations that you want to keep in house (e.g., AP or attendance reporting)?

• What specifically is included in the service bundle? Understand what is specially offered and what is not.  Seek detailed clarification on pricing, depth and frequency of services.  For example, will the provider attend all of your board meetings and how often are forecasts and cash flows updated?  Will they work with you on budget projections?  What tools are made available to the school for on-demand visibility to its financial data?  Then ask yourself if those services and tools match the expectations and needs of the school staff and board.

• Can the service flexibly adjust to my needs over time? Ask if the provider will tailor services to your needs or if it’s a one-size-fits-all service.  What other defined service scope options are available?  Further, as your school’s needs change over time, will the provider adjust its service scope to meet your requirements?

• What is the service delivery staffing model? Find out if the provider has specialized staff with deep expertise in their functional area or if a single individual is attempting to wear many different hats.  Ask how many schools are assigned to your primary support resource and find out each provider’s back-office support staff to client ratio.

• What will the service delivery experience be like? While the back-office services described by different providers may appear to be similar on paper, there can be tangible differences related to service delivery approach, support levels, and responsiveness.  Your best course is to spend the necessary time to speak with several clients of each provider to hear about the service experience directly from the schools. Additionally, don’t be satisfied with a few reference schools that have been selected for you by the provider; ask providers for a complete list of their back-office clients so that you can choose which schools to contact when performing reference checks.

Making the Most of the Relationship

You’ve worked hard to choose the right business services provider, now it’s time to make the relationship flourish.  A good relationship is built on a foundation of mutual understanding of expectations, roles, and responsibilities.  Your school needs to establish clear lines of communication with the provider, develop a clear understanding of the work flow with the provider, and have a reliable, designated onsite/internal staff member who coordinates the sharing of information (e.g. payroll, AP, etc.) with the provider.

As mentioned earlier, understanding what the service provider can and will provide for your school is critical for a good working relationship.  Once a school leader and board understand what the business services provider will deliver, they can fill any remaining gaps with additional staff or staff allocations to particular tasks.  This understanding aids in the efficient completion of back-office tasks and avoids costly mistakes that can be time consuming to fix.  Gently, but firmly, keep the provider accountable for what is included in the contract.  It’s up to you to ensure continually that your needs are being met and your expectations exceeded.   Just as you do not settle for substandard work in the classroom, do not settle for it from your business services provider.  Excellence in the classroom can either be furthered or inhibited by the quality of your back-office operation.

As a school leader, you put tremendous time, energy, and effort into ensuring that your students have the best teachers and the necessary resources to reach their potential.   To ensure that your charter school, both as a business and learning center, reaches its highest potential, you need to provide your school’s leadership with the finest support and resources.   After a close examination of your team’s strengths and weaknesses, you may find that a business services provider, or more appropriately, a business services partner, can help you build a more sustainable and successful charter school.